Homer Alaska - Business

Flaring is over at the well near the Kenai Walmart store, but more development is on the way.

Buccaneer Energy's Dean Gallegos said that first well was a good sign for the company, which is pursuing up to five wells in that Kenai Loop gas field during the next 12 months.

Gallegos said that most of the company's leases in the area are ones that were dropped by Marathon.

Buccaneer's technical team had a theory that those sands were laid down at the same time as the ones in Cannery Loop. The first well, north of Walmart, was meant to test that theory.

"It has exceeded our expectations to date," he said.

Now the company is planning a second well in that area. That should spud in August or September. With a conditional-use permit approved by the city of Kenai's planning and zoning commission, Gallegos said the company is finishing the permitting process for that well.

Up to three more will follow in this first phase of development, for a total of five wells by next June, he said.

Eventually, the company is considering up to 10 wells in that field.

The company's first well likely will be producing gas to take to market by December, Gallegos said.

Buccaneer is about to start negotiations to sell that gas, and could start hammering down a contract by the end of the month.

Gallegos said he doesn't know what the specifics of the contract will be.

A sales contract isn't the only work Buccaneer has to do before it can bring the gas to market.

A pipeline from the gas field to the existing sales line is also needed.

Gallegos said the company will hire contractors to build the pipeline.

"We will manage it ourselves," he said.

The permitting process for that portion of the project is under way, Gallegos said.

The on-shore wells aren't Buccaneer's only work in the area.

The company is also finalizing a joint-ownership agreement with the Alaska Industrial Development and Export Authority to bring another jack-up rig to the Cook Inlet.

"We would expect that to be finalized in the next two to four weeks," Gallegos said.

Once the agreement is finished, the rig will have some work done at the dockyard. Gallegos said it would likely come to North America at the end of the calendar year.

The rig is expected to start its work in the Southern Cross unit at the beginning of the 2012 drilling season.

Buccaneer, an Australia-based company with other developments in Texas, is a relative newcomer to the Cook Inlet.

Buccaneer was originally working in the Gulf of Mexico and Texas, but realized that those assets didn't provide all the returns shareholders wanted.

"We started to scour North America for assets," Gallegos said.

Gallegos said Buccaneer's initial impression of Alaska was that it was too cold, too expensive and too green to pursue oil and gas developments.

"I think that's the impression of a lot of people," Gallegos said.

But, Gallegos said, those worries went away quickly as the company did its research and realized how much of the Cook Inlet was underexplored.

Gallegos said exploration doesn't come with much lower risk than the Southern Cross Unit, where there's been quite a bit of development in the area.

While the low risk, high return was the main reason the company ventured north, Gallegos said the state's incentives also helped.